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Title: Are UK industries resilient in dealing with uncertainty? The case of Brexit
Authors: Bouoiyour, Jamal
Selmi, Refk
Issue Date: 2018
Publisher: European Association for Comparative Economic Studies (EACES)
Università Carlo Cattaneo - LIUC
Bibliographic citation: Bouoiyour Jamal, Selmi Refk (2018), Are UK industries resilient in dealing with uncertainty? The case of Brexit. In: The European journal of comparative economics, vol. 15, n. 2, 2018, p. 277-292. E-ISSN 1824-2979. DOI 10.25428/1824-2979/201802-277-292.
Abstract: Given the European Union (EU)’s central role in regulating various sectors, the decision to leave poses profound questions for UK industries in upheaval. This paper adopts an event-study methodology to examine, at sectoral level, the dynamics of stock prices surrounding the announcement of the UK’s EU membership referendum on 24 June 2016. We find that the adjustment of stock prices is inconsistent with the Uncertain Information Hypothesis assuming that policy changes are typically associated to a decrease of stock prices, but once the uncertainty-induced event is reduced, stock prices would increase again. Analyzing seven sectors of British stock index, we show that the Brexit had a significant impact on the valuation of UK companies. While all industries face increasing uncertainty, the referendum outcome had varying sectoral effects. Specifically, the responses of banks and financial services, defense and airlines, real estate and technology to the Brexit event were even more severe than the reactions of oil and gas, pharmaceuticals and consumer goods. The lack of opportunity to benefit from the European passporting rules to establish businesses, to access to EU’s Research and Development funds and to hire the skilled workers have been offered to explain the adverse effects of Brexit on UK industries.
Journal/Book: The European journal of comparative economics
Appears in Collections:EJCE

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